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Sina Leaves Investors Cold
The good news for Chinese Internet portal Sina is that it is well-positioned to ride a recovery in the Chinese online-advertising market.
Unfortunately, judging from the company's second-quarter results, that recovery is still some way off. Advertising revenue dropped 11% from a year earlier, and net profit fell 41% in the June quarter.
This is admittedly a tough comparison because the Beijing Olympics last year spurred heavy ad spending.
But Sina's outlook wasn't particularly inspiring either. The company's financial chief described advertiser sentiment as 'still fragile,' and 'fluctuating on a month-by-month basis.'
It is going to take a significant clearing of this haziness for investors to back this stock. Shares are down nearly 30% over the past year, a dismal performance compared with other Chinese Internet plays: Search engine Baidu is up 5% in the same period, while diversified Internet company Tencent has jumped 71%.
At rival Internet portal Sohu.com, results have been cushioned from the downturn by substantial revenue from online gaming, a defensive sector that provides cheap and addictive entertainment to Chinese youth. There, analysts expect revenue to rise 21% this year.
At Sina, analysts expect no increase in sales, based on estimates tallied before the latest report.
Further clouding the outlook is Sina's planned $1.4 billion acquisition of a network that plays video ads in stores and office-building elevators. The deal, with Focus Media, has languished for nearly nine months, awaiting antitrust approval from the Commerce Ministry. It now may be scrapped or altered.
In short, it is difficult to know what the immediate future holds for Sina, in both its core online business or its foray into offline advertising.
Investors wanting to jump into China's Internet universe have plenty of other options.
